Monday, June 21, 2010

Yuan de-pegging likely to trigger bull run, F&O expiry to keep a check

China's loosening stance on the yuan is likely to boost currency values across Asia while relieving upward pressure on Asian interest rates. China's stock and bond markets will likely rally in reaction to Beijing's pledge Saturday to increase the currency's flexibility after nearly two years of keeping it pegged against the dollar.

Indian Rupee too will appreciate as a follow up to the above mentioned positive news. F&O expiry might keep a check on the Nifty upmove. Euro concerns seems to have disappeared atleast for now. It is amazing how the S&P tested the support level third time and bounced back. One should keep in mind if there is any downturn in the US market this week it would signal a death blow again for bulls. We are catiously optimistic after being bearish for the last 2-3 months. Indian markets are denying any raids by the bears courtesy the strength of the economy.

Interest rate hike is inevitable and avoid rate sensitive sectors like Auto, Realty for the short term. Concentrate on small caps and midcaps for now as large cap valuations are inline for the short term. Expect Nifty to trade in the band of 5200-5300 for the expiry week unless another leg of downturn unveils.